President Barack Obama and his nominee to become Health and Human Services secretary, Budget Director Sylvia Mathews Burwell, right, listen as outgoing HHS Secretary Kathleen Sebelius speaks in the Rose Garden of the White House in April.

Associated Press

A left-leaning think tank whose research is often taken seriously by backers of the health-care overhaul has published a paper suggesting the administration should scrap the health law’s requirement that employers offer coverage or pay a penalty.

“Why Don’t We Just Get Rid of the Employer Mandate?”, by three researchers at the Urban Institute, argues that the requirement won’t lead to many more people gaining coverage, since most firms that don’t currently offer benefits to all their workers will opt for the penalty, and most firms that already voluntarily offer benefits will want to carry on doing so.

The researchers say that the penalty isn’t necessary to stop employers from dumping their workers now that they can get coverage other ways. They reason that workers will still consider employer insurance attractive, and so employers will conclude that it’s worth providing because tax breaks on employee benefits offset some of the cost of providing them.

(A paper by research group S&P Capital IQ makes the opposite argument, saying that S&P 500 companies could save around $700 billion through 2025 if they dump their workers onto the exchanges, because of rising health costs. That report does assume employers would pay penalties if they don’t offer coverage, but doesn’t take into account the tax treatment of employee benefits.)

The Urban Institute researchers also note that the details of the mandate — it applies to businesses with 50 or more workers, and to workers clocking 30 hours a week or more — will “undoubtedly” create some labor market distortions, even if they are “modest.” (See here, here and here for early Journal articles on that issue.)

“Eliminating the employer mandate would eliminate labor market distortions in the law, lessen opposition to the law from employers, and have little effect on coverage,” say Linda Blumberg, John Holahan and Matthew Buettgens of the institute.

The point that it’s really the law’s provisions that individuals get coverage and have help to do so that matter is one that the law’s supporters have made before, in defense of the Obama administration’s decision to delay enforcement of the requirement first for 2014,then for 2015.

But the Urban Institute memo makes the case for permanent delay in an unusually blunt way, and it’s also rare to see supporters of the law talking about labor market distortions, even modest ones.

A senior Obama administration official was less than enthusiastic about the paper, pointing out that it also calculated that repealing the requirement would cost around $46 billion between 2014 and 2023 because the federal government wouldn’t have the revenue from penalties and would have to pay more to help some people get coverage on their own.

“As this report points out, the employer responsibility provision helps more people get health insurance and saves taxpayers money,” the official said. “It also levels the playing field to ensure that large businesses that do not provide health insurance aren’t at a competitive advantage compared to those businesses that do provide health coverage to their employees.”

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